Vodafone Idea Needs to Fix High Churn Rate Fast

ICICI Securities said that the good ARPU growth for Vi came on the back of 2G subscribers decline. The telco lost a net 6 million users during the quarter, which brought the subscriber base to 234 million. At the same time, Vi's postpaid subscriber base grew by 0.7 million to 20.9 million, majorly driven by mobile users and M2M/IoT. 

Highlights

  • Vodafone Idea (Vi) recently announced the Q2 FY23 results.
  • The telco reported a loss of Rs 7529.5 crore.
  • The loss has widened compared to Rs 7295.7 crore in Q1.

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Vodafone Idea

Vodafone Idea (Vi) recently announced the Q2 FY23 results. The telco reported a loss of Rs 7529.5 crore. The loss has widened compared to Rs 7295.7 crore in Q1. Vi said that its quarterly revenues again grew, but there was no positive effect on the net income. What's currently very alarming for the telco is its higher churn rate. Vi needs as many paying subscribers as it can get in order to get going. In the last six quarters, Vi's subscriber churn rate had never crossed the 3.5% mark, which was still quite high. But in Q2 FY23, the churn rate was reported at 4.3%. This is very high, especially when the telco needs more high ARPU customers.

Vi's active customers declined from 218.7 million users in Q1 to 212.2 million in Q2. But amidst all this, Vi said that it added 1.6 million new 4G subscribers during the month. So it is not the 4G subscriber base that's declining, which is good. The telco's average revenue per user (ARPU) grew to Rs 131 from Rs 128 in the previous quarter.

ICICI Securities said that the good ARPU growth for Vi came on the back of 2G subscribers decline. The telco lost a net 6 million users during the quarter, which brought the subscriber base to 234 million. At the same time, Vi's postpaid subscriber base grew by 0.7 million to 20.9 million, majorly driven by mobile users and M2M/IoT.

What's really discouraging is the fact that total minutes of use fell from 450 billion in Q1 to 428 billion in Q2. It has been declining over the quarters continuously. By the end of the quarter, Vi's net debt had grown to Rs 2,201 billion. The net debt was up by 200 billion because of the 5G spectrum auctions, which cost around Rs 188 billion, and the remaining was the interest not paid on the dues.

One of the most important things that ICICI Securities noted was, "Company has been facing capital constraints, but is in a much better position than telcos that went defunct in the not-so-distant past in India."

This means that Vodafone Idea will continue to do business. The government will also ensure that there's no scenario of a duopoly in the country.

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